It’s goodbye T-Mobile, hello Verizon at RadioShack HQ this morning. The scrappy consumer electronics chain says it’ll sever its profit-starved relationship with T-Mobile and take up with mobile giant Verizon Wireless instead. While RadioShack reported a sharp decline in second-quarter profits, news of the Verizon deal sent company shares soaring nearly 24% to $15.92 in late Tuesday morning trading.
[UPDATE: T-Mobile PR just emailed with the following statement, which paints today's tech divorce in a slightly different light: "After careful consideration, we decided that in order to increase the effectiveness of our retail network and in line with our sales strategy, T-Mobile will exit RadioShack retail locations, effective September 15, 2011. We are currently focused on higher return national retailer opportunities and we expect to announce new channel growth in the coming weeks, which will more than double the number of RadioShack doors currently offering T-Mobile products and services."]
RadioShack says Verizon will offer both contract-based and prepaid products and services at upwards of 4,300 RadioShack-operated stores. The new partnership kicks off September 15th this year, and comes more than two years after RadioShack and T-Mobile struck a deal to double the number of retail stores selling T-Mobile products.
Of course RadioShack switching from a modest-sized carrier like T-Mobile to a mega-carrier like Verizon’s not exactly shocking. Depending on the terms of RadioShack’s partnership with Verizon, it stands to be a major revenue booster for both companies. And it was probably inevitable given the unprofitable relationship, including some contractual discord: In February, RadioShack said T-Mobile USA had “materially breached” its contract, though at the time RadioShack noted it was working to resolve the issue.
“We can’t discuss the details of the legal discussions that are underway or what the breach involves, but our conversations continue to be constructive and we hope to have a resolution as quickly as possible,” said RadioShack spokesperson Eric Bruner then.
According to Wedbush analyst Michael Pachter (hat tip to Reuters), today’s announcement’s nothing to sniff at simply because of Verizon’s size. Where T-Mobile was “a pretty small partner, says Pachter, Verizon is “three times as big,” which means—no head-scratcher here—more customers are going to activate Verizon phones at RadioShack stores than did T-Mobile.